On 25 June 2020, the Corporate Insolvency and Governance Bill (the “Bill”) received Royal Assent and on 26 June 2020 CIGA came into force. The restructuring team in Mayer Brown’s London office have previously commented on the different elements of the Bill in a series of blog posts and podcasts. CIGA was swiftly followed by the introduction of The Pension Protection Fund (Moratorium and Arrangements and Reconstruction for Companies in Financial Difficulty) Regulations 2020 (the “Regulations“), which came into force on 7 July and were subsequently amended yesterday on 23 July. Now that CIGA is in force, we take a closer look at the legislation from a pensions perspective.

Continue Reading The UK Corporate Insolvency and Governance Act 2020 (“CIGA”) from a Pensions Perspective

The Corporate Insolvency and Governance Bill 2020 (the “Bill“) introduces a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). It is proposed that the legislation governing the Restructuring Plan will sit alongside the schemes of arrangement and be included in a new Part 26A to the Companies Act 2006.

The Restructuring Plan will not apply to companies that are solvent with no risk of insolvency; rather it will only apply where two conditions are satisfied:

  • condition A: the company has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern; and
  • condition B: a compromise or arrangement is proposed between the company and (a) its creditors, or any class of them; or (b) its members, or any class of them; and the purpose of the compromise or arrangement is to eliminate, reduce or prevent, or mitigate the effect of, any of those financial difficulties.

The Restructuring Plan may be proposed by the company, or its creditors, shareholders, liquidators or administrators. When the insolvency reforms were originally proposed, it was intended that the company be given exclusivity for a certain period to propose the Restructuring Plan. This exclusivity period would mirror the position in the US; however this is not included in the Bill, as drafted.


Continue Reading Restructuring Plan for Companies in Financial Difficulty – Changes Introduced by the UK Corporate Insolvency and Governance Bill

While those in the restructuring and insolvency profession have been attempting to predict what the temporary suspension of the wrongful trading provisions proposed by the government might look like, the Corporate Insolvency & Governance Bill (the “Bill”) is not quite as anticipated.

Wrongful trading is a claim which can be brought (with personal liability) against a director, when a company has entered insolvent liquidation or administration and the director knew or ought to have concluded that there was no reasonable prospect that the company would avoid such proceedings, but nevertheless continued to trade the business. The defence to the claim is that the director took every step to minimise potential loss to creditors. This has understandably concerned many boards of directors during the COVID-19 pandemic and the consequent uncertainty and, therefore, any relaxation to enable confidence to trade is likely to be welcome.


Continue Reading Wrongful Trading – Temporary COVID-19 Changes Introduced by the Corporate Insolvency & Governance Bill

A winding-up petition is one of the most critical pieces in a creditor’s armoury where a debt remains unpaid. However, in these challenging times, the government clearly wants to provide a temporary shield to companies who are unable to pay their debts due to COVID-19.

Although the announcement by the UK Government on 23 April 2020 referred to the restrictions on issuing winding-up petitions as being part of further measures to “protect the UK high street from aggressive rent collection and closure“, the Corporate Insolvency and Governance Bill 2020 (the “Bill”) is not sector specific – the changes apply to any company that can be wound up and to any type of debt, not just rent liabilities.


Continue Reading Winding-Up Petitions – COVID-19 Temporary Restrictions Introduced by the Corporate Insolvency and Governance Bill 2020